A Simple Characterization of the Second‐best Two‐part and Block‐rate Tariffs Theory and Applications

The general necessary optimality conditions for second‐best discrete multipart tariffs are rather complex. In this paper, we derive a simplified characterization of these conditions for two‐part tariffs and for block‐rate tariffs for given thresholds of these tariffs. The simplified necessary optimality conditions are equivalent to the necessary conditions for a Ramsey‐optimum for goods with continuously variable individually demanded quantities. We demonstrate that this characterization of second‐best multipart tariffs can be helpful, when applying the usual regulatory mechanisms to these tariffs. In particular, we consider Vogelsang–Finsinger (1979) regulation as well as a particular form of price‐cap regulation which is related to the Laspeyres index of prices.     

Partial Communication in a Voluntary‐Contribution‐Mechanism Experiment

This paper presents results of a voluntary‐contribution‐mechanism experiment with partial communication. It was found that the trend of mean investments depended on whether a communication network was connected and on how fast all subjects could share information. When each subject could communicate with two other subjects and the network was connected, the mean investment increased from 33 percent to 58 percent of the optimal investment. On the other hand, when each subject could communicate with only one other subject and the network was not connected, the mean investment decreased from 34 percent to 19 percent of the optimal investment.     

The CES‐‐Translog Production Function, Returns to Scale and AES

The translog functional form imposes no a priori restrictions on the substitution possibilities between the factor inputs, by relaxing the assumption of strong separability, and the CES–translog cost function specification allows for testing homothetic technology with Hicks‐neutral technical change. In this paper an n ‐factor CES–translog production function is presented which develops the parameters to directly assess scale effects from those due to technology in the production structure. In addition, by applying Shephard's lemma it was possible to derive the input demand functions, as well as the partial elasticities of substitution and the cross‐partial price elasticities of demand for a generalized CES–translog production structure.     

Governance and Management of Collective User‐Based Enterprises: Value‐Creation Strategies and Organizational Configurations

Abstract The evolution of the collective enterprise may be conceptualized in three phases throwing into relief five strategies for the creation of value. The first corresponds to the emergence of a collective enterprise, an innovation in itself. The second, the spread of the innovation by replication, is linked to federalization and to the beginning of standardization. The tension between innovation and standardization begin to make a difference as early as this replication phase, but later it becomes more critical. It forces the collective enterprise to avoid wholesale standardization, an outmoded option, and instead allows space for considering one of the two strategies for the creation of value in keeping both with its distinctive social economy identity and with the new strategic approaches centred on the competences of the enterprise and the creation of value for the user. Thus, the collective user enterprise may move forward by focusing, i.e., by even greater innovation in its provision for a target group of members. The collective enterprise may also progress by hybridization, i.e., through re‐combining in a better way the innovation and standardization required to respond, effectively and efficiently, to a group of owners that is not only very large, but also highly diversified. The authors identify the organizational configuration for each pattern of value‐creation by concentrating on governance structures and the role of managers .     

The adjustment of external tariffs in the Kemp‐Wan‐Grinols compensation scheme

Abstract.  This paper considers the adjustment of external tariffs when two countries integrate and implement the Kemp‐Wan‐Grinols compensation scheme. Attention is also paid to the restrictions set by Article XXIV of GATT. This paper shows how the external tariffs would change in a three‐good, three‐country model under the assumption of gross substitutability. The results are sensitive to the initial trade pattern. In particular, they depend on the number of goods initially traded between the member countries. The analysis can be extended to a multi‐commodity model if the preferences of the countries have identical CES representation. JEL classification: F11, F15     

Consumer‐benefiting exclusive territories

Abstract.  I investigate the effect of exclusive territories, which are typical vertical controls imposed by upstream firms. Using shipping spatial models, I consider an industry that consists of many independent local markets. An upstream monopolist restricts competition between downstream firms using exclusive territories. I find that exclusive territories reduce the prices of final products in all local markets in quantity‐setting competition. In price‐setting competition, they raise prices in half the local markets, reduce them in other markets, and also reduce the total consumer surplus. JEL classification: L42, R32     

Quasi‐geometric discounting: A closed‐form solution under the exponential utility function

This paper studies a discrete‐time utility maximization problem of an infinitely‐lived quasi‐geometric consumer whose labour income is subject to uninsurable idiosyncratic productivity shocks. We restrict attention to a first‐order Markov recursive solution. We show that under the assumption of the exponential utility function, the problem of the quasi‐geometric consumer admits a closed‐form solution.     

Games in Dynamic‐Epistemic Logic

The author discusses games of both perfect and imperfect information at two levels of structural detail: players' local actions, and their global powers for determining outcomes of the game. Matching logical languages are proposed for both. In particular, at the 'action level', imperfect information games naturally model a combined 'dynamic‐epistemic language'– and correspondences are found between special axioms in this language and particular modes of playing games with their information dynamics. At the 'outcome level', the paper presents suitable notions of game equivalence, and some simple representation results.     

Tax compliance and firms' strategic interdependence

We focus on a relatively neglected area of the tax-compliance literature in economics, the behaviour of firms. We examine the impact of alternative audit rules on receipts from a tax on profits in the context of strategic interdependence of firms. The enforcement policy can have an effect on firms' behaviour in two dimensions — their market decisions as well as their compliance behaviour. An appropriate design of the enforcement policy can thus have a “double dividend” by manipulating firms in both dimensions.     

Tax‐deferred savings plans and interest deductibility

Abstract.  Programs that defer taxes on savings (e.g., RRSPs or 401(k)s) are supposed to move income tax systems closer to the more efficient consumption tax. Whether or not RRSPs move income tax systems away from or closer to a consumption tax depends on whether or not interest on debts incurred to make RRSP contributions is deductible for income tax purposes. If people optimize as assumed in simple life‐cycle models, then it may be that governments can convert a non‐linear income tax system to a proportional consumption tax system. I argue this is plausible for some Canadian households. JEL classification: H21, H24     

ω‐Homothetic Preferences: Theory and Applications

This paper develops a new class of homothetic preferences which generate Marshallian demand curves for individual goods which can be concave, convex or linear in own price under the assumption that agents treat aggregate price indices as given (as in Dixit‐Stiglitz, 1977). The preferences are represented by a cost function which has two parameters: one determining the curvature of the Marshallian demand; the other determining the elasticity of demand when all prices are equal. The elasticity of demand varies with relative prices. Illustrative examples are given of Cournot duopoly and exchange rate pass‐through.     

Entry and Schumpeterian profits

A large empirical literature has documented differences in Schumpeterian profits, both among firms in single industries and between firms in different industries. Theorists have proposed various institutional and strategic factors to account for such differences but have had relatively little to say about the manner in which technology affects entry and profits. In this paper I present a model in which persistent intraindustry differences in firm profitability arise as the outcomes of learning and imitation, and interindustry differences in the persistence of above normal profits arise solely from production being more technologically complex in some industries than in others.     

Export‐supporting FDI

A large fraction of affiliates owned by multinational manufacturing companies operate in the wholesale and retail sectors. This paper proposes a model of trade, horizontal FDI, and export‐supporting FDI (ESFDI). ESFDI reduces distribution costs abroad, while production remains at home. ESFDI introduces a complementarity between trade and FDI, while trade and production abroad remain substitutes. German firm‐level FDI data show that ESFDI is quantitatively relevant. In line with the model, most firms choose either ESFDI or horizontal FDI in a given market; ESFDI is chosen by smaller parents and is strongest when distance from Germany is low.     

Governance in Democratic Member‐Based Organisations

Abstract This paper considers issues of governance in democratic member‐based organisations (DMOs), such as co‐operatives and mutual societies. It examines the processes whereby members' interests are mediated through the democratic process, and the board; and it explores some of the factors influencing the power of managers. It goes on to argue that the system of governance in DMOs in their institutional context runs the risks of managers becoming powerful and entrenched in poorly performing social economy organisations, unless countervailing measures are adopted.     

Life‐cycle asset accumulation and allocation in Canada

Abstract.  This paper documents the life‐cycle patterns of household portfolios in Canada, and investigates several hypotheses about asset accumulation and allocation. Inferences are drawn from the 1999 Survey of Financial Security, with some comparisons to earlier wealth surveys from 1977 and 1984. I find cross‐sectional evidence for asset decumulation at older ages when annuitized assets like pension wealth are included in the analysis. I also find that the portfolio share of financial assets increases sharply with age, while indicators of risk tolerance appear to decrease. This is consistent with families' desiring more liquid and less risky assets as they age. JEL classification: D31, E21, G11     

Inflation and Openness with Non‐Atomistic Wage Setters

This paper analyses the impact of trade openness on inflation in a strategic framework characterised by monopolistic production in the domestic sector and unionised labour markets. By stressing the interplay between internal and external sources of economic distortion, we show that the economy's inflationary bias reduces up to a critical level of trade openness. Beyond this threshold, wage setters may be induced to behave more aggressively in open economies, leading to higher equilibrium inflation. Based on a regression analysis that investigates the combined effect of labour market institutions and openness on inflation across nineteen OECD economies, we show that inflation is negatively related to openness when wage bargaining is decentralised, while there is virtually no link between openness and inflation at higher levels of wage centralisation.     

Government Underpricing of Share‐Issue Privatizations

Abstract *** :  The purposes of the paper are to determine whether governments underprice shares in fixed‐price share‐issue privatizations (SIPs) and, if so, what their motivations are for doing so. This paper develops three models of SIP underpricing: one based on revenue goals, one based on political goals and an inclusive model which supposes that the level of underpricing depends on both government revenue goals and political goals. These models are estimated using an international sample of 104 SIPs from 25 countries. We find that, on average, SIPs are underpriced by approximately the same amount as private sector initial public offerings (IPOs). This is not consistent with the sole goal of revenue maximization because SIPs should not require the same degree of underpricing as IPOs. The inclusive regression fits the data well and indicates that both revenue and political goals affect the level of SIP underpricing .     

Fairness and Incentives in a Multi‐task Principal–Agent Model

This paper reports on a two‐task principal–agent experiment in which only one task is contractible. The principal can either offer a piece‐rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece‐rate contracts. Many principals reward high effort on both tasks with substantial bonuses. Agents anticipate this and provide high effort on both tasks. In contrast, almost all agents with a piece‐rate contract focus on the first task and disregard the second. Principals understand this and predominantly offer bonus contracts. This behavior contradicts the self‐interest theory but is consistent with theories of fairness.     

A Model of Balance‐of‐Payments Crises due to External Shocks: Monetary vs. Fiscal Approaches

This paper develops a model for balance‐of‐payments (BOP) crises triggered by an external shock. Whether an external shock induces a BOP crisis depends crucially on the sequence of policy actions taken by the government's monetary and fiscal authorities. If the fiscal authority moves first and imposes an exogenous constraint on the monetary authority, an external shock can lead to a BOP crisis. However, if the monetary authority moves first and imposes an exogenous constraint on the fiscal authority, the same shock does not cause a BOP crisis.     

Trading Behavior and Asset Returns: Evidence from the Interday Serial Correlations of Intraday‐to‐Intraday Daily Returns of Taiwan

This paper sheds light on the importance of trading behavior in the determination of asset prices by examining the interday serial correlations of intraday‐to‐intraday daily returns of the Taiwan Stock Exchange (TSEC). The TSEC exhibits positive serial correlation in the beginning and the end of the week and negative serial correlation in the middle of the week. The interday serial correlation is not a result of non‐synchronous trading, bid‐ask bounce in transaction price, or price limits. The serial correlation is positively related to trading volume and similar to the pattern in the US. We suggest that trading behavior seems to be an important determinant of asset prices.